2016 Vault Rankings

Cisco Systems, Inc. at a Glance

Uppers

Downers

Finding a career path and earning promotions can be challenging for some employees

The Bottom Line

Cisco Systems is a well-respected technology company with a top reputation as employer.

About Cisco Systems, Inc.

Cisco Systems makes the network gear -- routers, switches, and
servers as well as software -- that move information around the
internet and corporate networks. The company, which has dominated
the market for internet protocol-based networking equipment, also
makes security devices, internet conferencing systems, set-top
boxes, and other networking equipment to businesses and government
agencies. Software that controls networks has become an increasing
focus for Cisco, which also provides consulting services. Most
sales come from customers in the Americas. Cisco's primary
customers are large enterprises and telecommunications service
providers, but it also sells products designed for small
businesses.

Operations

The meat-and-potatoes of Cisco has been its switching equipment
which generates 30% of its revenue while its next-generation
networking routing gear accounts for 15% of revenue. Services
provide about a quarter of the company's. The rest of the company's
product lines are collaboration products (about 10% of revenue),
data center (less than 10%), and wireless and security (about 5%
each).

While the Americas is Cisco's largest market, accounting for
some 60% of its sales, about half its employees reside outside of
the US. European customers generate 25% of revenue and the
Asia/Pacific region supplies about 15%.

Cisco's headquarters is in San Jose, California. It also has
regional headquarters in Amsterdam and Singapore. Cisco has a
Globalization Center East campus in Bangalore, India. The company
has other significant operations in Belgium, China, France,
Germany, India, Israel, Italy, Japan, Norway, and the UK.

Financial Performance

Cisco Systems' revenue slipped 3% to $48 billion in 2017 (ended
July) from 2016. Product revenue fell 4% while service revenue rose
3% year-to-year. Revenues from Switching and NGN Routing were off
5% and 4%, respectively, in 2017. Switching sales were hurt by
lower sales of switches used in campus environments due to general
economic uncertainty and competition. Sales in Security and
Wireless grew by 9% and 5%, respectively.

Net income dropped 11% to $9.6 billion in 2017 from 2016. While
the company reduced costs in 2017, it had a higher effective tax
rate for the year.

Cash flow from operations closed out 2017 at $13.8 billion
compared to about $13.6 billion in 2016.

Strategy

Cisco has been a hardware company, making the switches and
routers and other devices that transfer information. But it is
building up its software offerings for cloud computing and
software-defined networks (SDN). Telecom service providers, in
particular, are moving toward SDN to program their networks. In
response, Cisco is shifting its business to a more subscription and
software-based model. To address the emergence of SDN, the company
offers its Application Centric Infrastructure (ACI), which delivers
centralized application-driven policy automation, management, and
visibility of both physical and virtual environments as a single
system. The system is composed of Cisco's Nexus 9000 portfolio of
switches, improved versions of its NX-OS operating system, and the
Application Policy Infrastructure Controller (APIC).

In another software-centric strategy the company's Cisco DNA
Center, a centralized management dashboard for its intuitive
network, and ETA are available through subscriptions on the Cisco
Catalyst 9000 Series Switches. Such moves get Cisco closer to
cloud-managed products and services across our its networking
portfolio. In 2017 (ended July), the company's deferred product
revenue related to software and subscriptions grew to $5 billion, a
50% year-to-year increase and a doubling over two years.

The company is also addressing its software capabilities through
acquisitions. In 2017 the company was to spend nearly $6 billion to
shore up its software side in networking, file systems, and
telecommunications.

In 2015, Cisco partnered with Ericsson to develop products and
services in areas such as 5G, cloud computing, internet protocol,
and the Internet of Things. Their goal is to add $1 billion in
revenue for each company by 2018. The deal helps Cisco and Ericsson
counter the merger of Alcatel-Lucent and Nokia, which created the
second biggest provider of telecom equipment (Huawei is #1).

In 2017, Cisco teamed up with Google to build more efficient
hybrid cloud offerings. They are to work on the security,
configuration, and policy requirements of enterprises, as well as
capabilities for delivering real-time networking and performance
data.

Cisco started 2017 with the $3.7 billion acquisition of
AppDynamics, which develops software that monitors performance of
applications. The acquisition further fills out Cisco's networking
software lineup. Cisco's acquisition offer came just before
AppDynamics sold stock to the public in an initial public offering.
The deal, concluded in March 2017, reinforced Cisco's
software-centric strategy.

In mid-2017 Cisco agreed to acquire Springpath Inc., a developer
of a distributed file system built for hyperconvergence that
enables server-based storage systems, for about $320 million in
cash. The companies have had a relationship that includes
development of HyperFlex, an integrated hyperconvergence
infrastructure. Cisco also was an investor in Springpath.
Hyperconvergence integrates computing, storage, networking, and
virtualization resources in hardware.The deal further builds out
Cisco's data center capabilities.

Cisco continued its software shopping spree later in 2017 with
its agreement to buy
BroadSoft, a developer of telecommunications software, for $1.9
billion. The deal would provide Cisco with a range of software and
services that allow mobile, fixed-line and cable service providers
to offer unified communications over their internet protocol
networks. The transaction closed in early 2018.

In another 2017 deal Cisco acquired MindMeld Inc., an artificial
intelligence company that develops conversational interfaces for
applications and devices, for about $125 million. The acquisition
would help Cisco build voice and text capabilities into its
collaboration products.

In 2016 Cisco completed the acquisition of Jasper, which
develops a cloud-based Internet of Things (IoT) service platform,
for $1.4 billion. With the deal, Cisco can provide more
comprehensive range of IoT products and services.

In 2016 Cisco completed the acquisition of Jasper, which
develops a cloud-based Internet of Things (IoT) service platform,
for $1.4 billion. With the deal, Cisco can provide more
comprehensive range of IoT products and services.